Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

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New Home Purchases and Building On the Rise

Orange County, CA – The latest HUD report shows that sales of newly-built homes rose last month, even faster than the rate of overall home purchasing (which is also rising.) Home developers are reporting that they’re getting more foot traffic than they’ve gotten since 2008, and they don’t see the trend changing before the end of the year.

This means, of course, that home prices are probably going to go up as we move into the second half of the year. The number of new homes sold in August was 8% higher than July’s numbers, and 13% greater than the numbers of last August. In addition to selling more homes, the average home <i>price</i> also increased by $13,000.

Rising Prices Reflect Supply Shortages

The increase in prices is most likely to be a result of the fact that builders are unable to keep up with the current demand. There are simply too many buyers who are trying to take advantage of the current low mortgage rates .

‘Home Supply’ and What it Means to You

New home builders use the ‘home supply’ as an indicator of their market. The home supply is measured in time. Specifically, it’s the amount of time, given the average sales per month, that it would take to exhaust all of the new homes that are ready for purchase. It’s considered ‘balanced’ to have a home supply of about six months.

Today, the home supply is only five months, which means the market is likely to rise, and sellers have the upper hand in negotiations. The last time we had a “new construction” market like this one, buyers often found themselves at sellers’ mercies – because in this kind of market, many ‘sellers’ are in fact corporations that have just built the new home in question, and corporations don’t have the same kind of pressure to sell that individuals do. They’re not selling because they need to move to a new job or their kids have left home and it’s time to downsize. They’re selling for pure profit.

This Market Isn’t Going to Change Anytime Soon

If you’re a buyer, the market for new construction isn’t on your side — and the percentage of the market dominated my new construction is growing steadily. That leads us to a few points of advice:

  1. Don’t Buy From Builders – There may be a lot to be said for brand-new homes, but the economics of the situation favor seeking out an individual seller that is more likely to have some sort of life event that’s forcing them to sell. It may seem callous and calculating, but if you want to get the best deal on your new home, taking advantage of situations like this is vital.
  2. Don’t Wait to Buy – With new construction as an ever-growing part of the housing pool, the longer you put off buying that new home, the harder it will be to find a seller that is willing to give a little in order to get what they need out of the deal. Move the moment a decent opportunity knocks.

Contact me if you need assistance or have any questions.

Scott Storace


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